BTr partially awards reissued 20-year bonds

THE GOVERNMENT made a partial award of the reissued 20-year Treasury bonds (T-bonds) it offered on Tuesday as rates rose due to waning appetite for longer tenors amid concerns over the health of the US economy.

The Bureau of the Treasury (BTr) raised just P19.758 billion via the reissued bonds it auctioned off, lower than the P30-billion plan even as total bids reached P34.469 billion as it sought to cap the increase in yields. The award brought the total outstanding volume for the bond series to P184.1 billion, the Treasury said in a statement.

The bonds, which have a remaining life of 13 years and eight months, were awarded at an average rate of 6.473%. Accepted bid yields ranged from 6.3% to 6.5%.

The average rate for the reissued papers rose by 37 basis points (bps) from the 6.103% fetched for the series’ last award on Aug. 20, 2024 but was 27.7 bps lower than the 6.75% coupon for the issue.

This was also 6.4 bps above the 6.409% quoted for the 15-year bond — the tenor closest to the remaining life of the papers on offer — and 12.3 bps higher than the 6.35% seen for the same bond series at the secondary market before Tuesday’s auction, based on PHP Bloomberg Valuation Service (BVAL) Reference Rates data provided by the BTr.

The government partially awarded its bond offer as the papers fetched yields higher than prevailing secondary market rates following Moody’s move to downgrade the US’ triple-A credit rating due to fiscal concerns, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Demand was also weaker compared to recent T-bond offerings, with the BTr choosing to reject high bid yields, Mr. Ricafort said.

“It looks like there’s less appetite for bonds with tenors longer than 10 years,” a trader said in a text message. “This is what we saw during the 20-year auction as well where the market demanded higher yields, although the result was different.”

“The award was at the higher end of the expected range. This somehow gives a signal on where demand is at the moment. We expect the BTr to focus the supply on five- to 10-year space for the third quarter borrowing mix.”

Tuesday’s auction was the last for May. In June, the BTr is looking to raise P230 billion from the domestic market, or P100 billion via Treasury bills and P130 billion through T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.54 trillion or 5.3% of gross domestic product this year. — A.M.C. Sy